Whether you’re growing crops or handling livestock, few small business owners rely on their environment and equipment the way farmers do. With the help of farm loans, you can boost your working capital, finance farm equipment or even add to your land.
What Is Farm Financing?
You already work hard, so make agriculture financing work for you. From agricultural equipment financing to debt refinancing, farm loans can help you grow your business.
Looking to add to your farm’s footprint? Farm loans can give you the capital needed to make a significant investment, including purchasing property or repairing existing buildings.
Finance Farm Equipment
Working equipment is vital to keep your agricultural business running at its full capacity.
Whether you’re upgrading older equipment or buying more farm tractors, financing can help you meet your farm’s needs.
Prepare for the Busy Season
From planting to harvest, your farm’s needs are likely to change with the seasons. Working capital loans can help your business adjust, whether you need to build up your labor force, increase your feeding supplies or make essential purchases.
Maybe your farm took out earlier debts, and you’re hoping to reduce payments now that your financial standing has improved. If you can get more favorable rates for small business loans for agriculture, it’s a viable option for refinancing existing debts.
Best Farm Loans and Financing Options
Let’s explore how to get a loan for your agriculture business, plus the best financing options available. Keep in mind, farm loan rates vary based on type and lender, and there may be minimum requirements specific to revenue, credit score and time in business.
Farm Equipment Loans
From backhoes to bailers, if your heavy equipment slows down, so will your farm’s operations. With farm equipment financing, you may be able to cover the total value of the machinery you’re looking to buy. You can have a loan decision within 2 days so that you can get back to work. Required minimum credit scores for these loans typically range from 600-620.
Small Business Administration (SBA) Loans
SBA-backed loans help small agricultural businesses that might not be able to secure and qualify for financing through traditional means. Farmers may be able to apply for funds up to $5 million, and the term could extend for years, depending on the type of loan. Funds can be used for several needs.
- SBA 7(a) program: Use these small business loans for agriculture equipment purchases, land purchases, renovations or debt refinancing specific to business expansion.
- SBA Express loans: These loans can be secured in about 30 days—a faster turnaround than traditional SBA loans. The trade-off is that higher interest rates apply, and borrowing limits are capped at $350,000.
- SBA CAPLines: Also known as SBA lines of credit, CAPLines can be helpful in situations where you need short-term working capital. For farm financing, the Seasonal and Working CAPLines could be ideal.
- SBA 504 loan program: This funding can only be used to purchase or refinance fixed assets such as real estate or farm equipment.
SBA loans are available through banks as well as alternative lending marketplaces, including Fast Capital 360. Farmers and business owners need a personal credit score of 650 or better to qualify for an SBA loan.
Looking for Farm Loans With Bad Credit?
Farm owners with higher personal credit scores will be rewarded with better financing terms. FICO credit scores range from 300-850, and most forms of alternative funding—including lines of credit and short-term loans—require a minimum credit score of 500.
If you’re in search of farm financing but have bad credit, consider the following options:
- Short-term loans
- Working capital loans
- Business lines of credit
Learn how credit scores are calculated and improve your score.
Working Capital Loans
In agriculture, you navigate busy and slow seasons throughout the year. Use working capital funds for anything that keeps your farm running in the short term. Working capital can help you better prepare for the busy harvest or cover operational expenses during downturns.
You can have a funding decision in a day, depending on the lender. Because working capital loans are intended to address short term needs, repayment terms average about 18 months. Minimum credit score requirements vary by lender but can be as low as 500, making this option feasible if you’re financing a farm or ranch with bad credit.
Business Term Loans
Is it time for a significant investment, like acquiring more land? With a large, one-time influx of capital and repayment stretching across years, a business term loan could be right for you.
Because of favorable interest rates, business term funding can also be helpful if you’re looking for farm refinance loans. Loan amounts and repayments vary based on a variety of factors, including term length. Generally, you need a minimum credit score of 600 to qualify for a business term loan.
Lines of Credit
A business line of credit could be a viable source of financing if you’re unsure how much you need an agriculture loan, as is this case with livestock purchases or similar situations. With a business line of credit, you don’t have to use all the funds you’ve been approved for at once, and you’ll only accrue interest for what you spend. The credit line is restored up to its original limit as you pay off your debt.
You have the choice to apply for an unsecured line of credit, or put down collateral—assets such as equipment or financing—for a secured credit line. Each option has its benefits and drawbacks. Typically, the minimum credit score requirement to obtain a business credit line is 560.
Where to Find Farm Loans
Traditionally, banks are the first stop for business owners looking to secure funds. However, a lengthy and complicated loan process isn’t ideal for small businesses who need financing fast, despite the competitive terms and repayment options banks and credit unions may offer.
Online lenders and marketplaces fill the void left by conventional banks with lower qualification thresholds and rapid funding that provides farmers with fast capital. The difference means getting a loan for your business in hours instead of weeks.